Author Topic: JNJ - Johnson & Johnson  (Read 5012 times)

Read the Footnotes

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Re: JNJ - Johnson & Johnson
« Reply #20 on: October 19, 2019, 12:18:32 PM »

JNJ has accumulated an unusual amount of bad press and litigation issues and perhaps like CorpRaider suggested above...

Yes, I see it the same way. JNJ sells at ~13x forward earnings, which seems like a decent value. I believe the decline to the product recall today was overdone? I have to do more work on this, but based on. Y initial assessment, I felt it worthwhile to start a position. I feel thwt the device sector in particular could have some upside potential. In particular the Auris acquisition points to an effort to become a player in advanced robotics for surgery.
https://www.massdevice.com/jj-to-enter-the-robotic-surgery-market-with-3-4b-auris-health-buy/
I have followed closely the robotic sector for a very long time and it's fascinating. I could write pages and pages but will try to simply reply with a short and dense paragraph, a specialty of yours. :)
Intuitive and their da Vinci system has been around for a while but the robotics is still in its infancy, perhaps not unlike what cell phones looked like in the 1990's. ai think twat the future is promising and JNJ well positioned to internally develop options and opportunistically pay up to develop their robotic portgolio.
In case you're interest in superficial references:
https://www.roboglobal.com/insights/intuitive-surgical-gold-standard-robotic-surgery/
https://www.forbes.com/sites/michelatindera/2019/02/14/intuitive-surgical-stock-robot-surgery-da-vinci-alphabet-jnj-ceo-gary-guthart/#738ae52aa37b
A quick word of caution regarding the robotics area. Maybe this time is different, but there have been previous waves of excitement regarding robotics and for the most part it has been a pattern of a spurt in technological application, new products, and revenues, followed by a quick leveling off. This time may finally be different, but like the iPhone, it didn't work out that great the first several times that Steve Jobs tried to create a mobile device, so to continue that analogy, how do you know that this is finally the age of the iPhone?

With the previous quick plateaus was that the products didn't really live up to the hype and the sales especially in the real world. Once the novelty wore off, there were no new adoptions after a point.

One issue in the past was that almost all benefits in patient outcomes have been derived from the minimally invasive procedure and NOT the robotic aspect. In other words a minimally invasive procedure of any type might have better outcomes, but in most fields of surgery the robot did not add much. As a result, the robots had high rates of adoption in only a couple of fields.

Plus a lot of surgeons eventually felt that the benefits like speed weren't there. If you can get the same quality of outcome and do it faster with less hassle without the robot, why have a robot? Plus getting surgeons to adopt new techniques is notoriously hard and does not follow a path that you might assume if you were to just imagine how that should go.

Business factors etc come in to play eventually even if the initial decisions are irrational. Cigarbutt says he's followed the field for a long time, so maybe he's expert in the field. If you're an expert in the field, feel free to ignore these comments and maybe you understand well why this time is different, but I'd recommend some skepticism if you're not really confident in your thesis. Healthcare is complicated, and what actually happens is frequently not what a rational person would expect until you dig deeper and start to understand all the quirks and irrational aspects.


John Hjorth

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Re: JNJ - Johnson & Johnson
« Reply #21 on: October 19, 2019, 12:57:54 PM »
Market caps of other drug companies (in billions)

ABBV  113
AMGN 121
REGN   32
BMY     87
CELG    73
BIIB     41
GILD    82

That adds up to 549. You could buy up all the drug companies for less than the market cap of AAPL or MSFT.

Off topic :

+LLY   105 [<- Just sayin' [ ; - ) ]]

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Gregmal

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Re: JNJ - Johnson & Johnson
« Reply #22 on: October 19, 2019, 01:24:45 PM »
Market caps of other drug companies (in billions)

ABBV  113
AMGN 121
REGN   32
BMY     87
CELG    73
BIIB     41
GILD    82

That adds up to 549. You could buy up all the drug companies for less than the market cap of AAPL or MSFT.

Off topic :

+LLY   105 [<- Just sayin' [ ; - ) ]]

-Back to topic.

Back office topic!

What position would you rather be in as a company? Having a product with a TAM of everyone, where they all love your product and many buy new ones at 35%+ margins every two years and then fluff your bottom line with add on purchases.... or...... having a product with a TAM of everyone but people hate your products, only need them when in dire straights or facing potentially deadly circumstances, and buy them largely through subsidizations and price reducing programs...all of which are currently, and likely to continue to be, squeezed. Interesting question. Not sure of the answer, but I'd rather be Apple than all the others combined.

Cigarbutt

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Re: JNJ - Johnson & Johnson
« Reply #23 on: October 19, 2019, 02:37:26 PM »
...
A quick word of caution regarding the robotics area. Maybe this time is different, but there have been previous waves of excitement regarding robotics and for the most part it has been a pattern of a spurt in technological application, new products, and revenues, followed by a quick leveling off. This time may finally be different, but like the iPhone, it didn't work out that great the first several times that Steve Jobs tried to create a mobile device, so to continue that analogy, how do you know that this is finally the age of the iPhone?

With the previous quick plateaus was that the products didn't really live up to the hype and the sales especially in the real world. Once the novelty wore off, there were no new adoptions after a point.

One issue in the past was that almost all benefits in patient outcomes have been derived from the minimally invasive procedure and NOT the robotic aspect. In other words a minimally invasive procedure of any type might have better outcomes, but in most fields of surgery the robot did not add much. As a result, the robots had high rates of adoption in only a couple of fields.

Plus a lot of surgeons eventually felt that the benefits like speed weren't there. If you can get the same quality of outcome and do it faster with less hassle without the robot, why have a robot? Plus getting surgeons to adopt new techniques is notoriously hard and does not follow a path that you might assume if you were to just imagine how that should go.

Business factors etc come in to play eventually even if the initial decisions are irrational. Cigarbutt says he's followed the field for a long time, so maybe he's expert in the field. If you're an expert in the field, feel free to ignore these comments and maybe you understand well why this time is different, but I'd recommend some skepticism if you're not really confident in your thesis. Healthcare is complicated, and what actually happens is frequently not what a rational person would expect until you dig deeper and start to understand all the quirks and irrational aspects.

I agree with your assessment and it's hard to evaluate when real market penetration for robotics will occur but it will likely occur. The principle of transferring actual acts from control to autonomy (spectrum) has occurred (autopilots in planes etc) and is evolving in the car driving space. JNJ, based on its history and capital strength, is simply well positioned to occupy the space when the time comes.
If you evaluate JNJ along Mr. Philip Fisher's 15 points, the reported numbers, valuation and history do not make it a great investment at this point mostly because of the perceived brand quality (legal stuff) and margin threats but they are leaders in a growing market, are likely to maintain relatively high margins and are likely (IMO) to continue to transform R+D dollars into profitable investments either through internal developments, market expansion or entering related markets, including the robotic segment when the time comes.
The first time I got exposed to potential applications of robotic surgery (1987) JNJ share price was less than 5$. Since then, share price appreciation has been irregular (but quite satisfactory overall) and has not really benefitted from robotic surgery equipment sales but I'd be ready to bet that robotics will eventually reach the bottom line in the next 32 years.

Read the Footnotes

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Re: JNJ - Johnson & Johnson
« Reply #24 on: October 19, 2019, 04:24:17 PM »

I agree with your assessment and it's hard to evaluate when real market penetration for robotics will occur but it will likely occur. The principle of transferring actual acts from control to autonomy (spectrum) has occurred (autopilots in planes etc) and is evolving in the car driving space. JNJ, based on its history and capital strength, is simply well positioned to occupy the space when the time comes.


I agree completely that progress will be made and that the question is just a matter of how much and when. Miniaturization will likely be a large and under-appreciated component too. One place an investor could easily make mistakes is over-estimating how much low hanging fruit will be available at some point in time.

I do think that comparisons to other industries can be a little tricky and you want to be careful when making extrapolations from one industry to another. With any industry, you need to think about what is the low hanging fruit. For automation, a controlled environment makes a huge difference and that concept probably transfers easily across industries, but what is the low hanging fruit in a surgical setting may not be intuitive except to specialists.

I probably could have made my point in my previous post by saying that robotic surgery has gained and KEPT a foothold in the areas that turned out to be the low hanging fruit. The problem is that investors were frequently sold that there was other fruit higher on the tree that was reachable, and that often times turned out to be sales and puffery.

I hope I was clear that my comments were not based on JNJ's history but based on their competitors in the space. From your comments I don't think there was any confusion, but I could have been clearer on that point.
« Last Edit: October 19, 2019, 04:27:31 PM by Read the Footnotes »

Spekulatius

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Re: JNJ - Johnson & Johnson
« Reply #25 on: October 19, 2019, 04:47:52 PM »
I have owned JNJ before when it as cheap relative to the market and growth had slowed down. I think this was probably 15 years ago. I think they have proven time and time gain that they can restart growth and generate satisfactory results. itís a bit like Nestle that way. So I think it is a buy in heuristic way. I think at this point (aging bull market) , it will likely outperform the index with much lower risk. The main risk is that JNJ just stalk out, and one likely will be flat or perhaps slightly down, but it is unlikely that one will incur large losses. So itís a heads I ein, tails I donít lose (much) kind of situation. I actually think it is a Buffet buy, but he shied away from Pharma and health care overall.

The robotics angle is just a free option. It is an indication that they are working with the a LT perspective in mind.
To be a realist, one has to believe in miracles.

Read the Footnotes

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Re: JNJ - Johnson & Johnson
« Reply #26 on: October 19, 2019, 05:20:32 PM »
I have owned JNJ before when it as cheap relative to the market and growth had slowed down. I think this was probably 15 years ago. I think they have proven time and time gain that they can restart growth and generate satisfactory results. itís a bit like Nestle that way. So I think it is a buy in heuristic way. I think at this point (aging bull market) , it will likely outperform the index with much lower risk. The main risk is that JNJ just stalk out, and one likely will be flat or perhaps slightly down, but it is unlikely that one will incur large losses. So itís a heads I ein, tails I donít lose (much) kind of situation. I actually think it is a Buffet buy, but he shied away from Pharma and health care overall.

The robotics angle is just a free option. It is an indication that they are working with the a LT perspective in mind.

I would agree with most all of this. I would expand on your comments by saying that sometimes you get interesting opportunities in healthcare stocks when a consumer staples business is combined with a pharma business, or other business with higher R&D costs. The attributes of the businesses are so different that if enough people are lazy in their analysis odd valuations can emerge that present opportunties.

dwy000

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Re: JNJ - Johnson & Johnson
« Reply #27 on: October 20, 2019, 02:11:05 PM »
Market caps of other drug companies (in billions)

ABBV  113
AMGN 121
REGN   32
BMY     87
CELG    73
BIIB     41
GILD    82

That adds up to 549. You could buy up all the drug companies for less than the market cap of AAPL or MSFT.

Off topic :

+LLY   105 [<- Just sayin' [ ; - ) ]]

-Back to topic.

+ PFE  $205 [just sayin' as well]